tv Politics and Public Policy Today CSPAN June 30, 2016 9:00am-11:01am EDT
they'll pay an outrageous amount for those rights, create a new channel, and effectively try to, you know, force carry that channel in a market. so for us, the choice on regional sports became in a market like new york where you >> we'll leave this hearing at this point. you can see it online. go live this morning to the cato institute for a discussion on the tpp. u.s. trade representative michael fromman will be joined by scholars from cato, the american enterprise institute,
and the chicago council for global affairs for a discussion on tpp and possible obstacles facing that agreement. this is live on c-span3. >> to post them on twitter and use the #catotpp. we'll do our best to respond to your comments or questions, and maybe post a blog post tomorrow or next week to be responsive to those. so the title of today's event is "should free traders support the transpacific partnership." that seems like a rhetorical question to many, i suppose. of course they would support the tpp or free trade agreement. it's a little bit more complicated than that. free trade and free trade agreements are not the same animals. we're going to get into those distinctions on the first panel.
for now suffice to say free traders at the cato institute have found their way past differences and supported trade liberalization, however, incrementally, it was delivered in the past. when i joyed cato in the year 2000, the united states had fda with three countries, israel, canada, and mexico. today we have agreements with 20 countries, and each free trade agreement that produced those new partners was supported by my former colleagues at cato and myself. so we have found a way to supporting these kinds of agreements. after a fairly rigorous analysis, my cato trade colleagues and i have have come to the conclusion we support the tpp, and there are things we like about it. some things that we are a little uncertain of, or not as impressed by, and there are some things we're sort of ambivalent.
on par, there's more to like about the tpp than dislike. the deal is net liberalizing, it will expand american's economic freedoms, and we hope it will be ratified this year. so on the first panel this morning, we will discuss the pros and cons of the tpp and describe our scoring method. we did a paper assessing each chapter, and we'll go into the details there. so the title of that first panel is called "grading the tpp: what is to like and not like" and the panel is exposed of bill watson and simon lester, as well as derek scissors, he has some deeper reservations about the tpp, i'm sure he'll be happy to share them. on the second panel, we'll address the question of tpp ratification titled "obstacles to ratification: if not now then when." moderating that panel is dan pearson, and he'll be engaging
with washington trade policy icon and dear friend of the cato trade center clinton. as well as bill leavy in the bush administration and council of economic advisors then at the american enterprise institute and now senior fellow on global economy at the chicago council on global affairs. and also, director of international trade for jt international, and he's going to share his deep knowledge of one of the more substantiative obstacles to ratification nobody as the infamous tobacco. before introducing our distinguished keynote speaker, i would like to put the event into some broader context. as you're probably aware, there is a bit of an moss toward trade and globalization and the tpp. i think the anger is misplaced, frankly, or intentionally
misdistricted by politicians who see opportunity blaming foreigners and their products for everything that ails americans. we should remember, and we should remind our friend and neighbors that trade plays one role. trade's role is to expand the size of the economic pie, and trade liberalization makes that easier. it makes it easier for trade to play that role by removing barriers to trade and enabling economic integration, greater scope and economies of scale. i think trade fulfilled that role through trade agreements or unilateral agreements helped trade fulfill role. questions about the wealth created, by trade how it's distributed whether how quickly workers lose jobs and find new ones should not burden trade anymore than it burdens technology or changing consumer tastes and demands, which are the primary causes of job turn in the united states.
the purpose of trade is to expand the size of the pie not to ensure that every citizens is insulated from changes that ensue. you don't hear to compensate whose jobs have been made obsolete by apps on the phone. how about ideas to incentivize people to hire people and train them with a commitment they'll work for them for some period of time. how about reforming the corporate tax system. a system that currently discouraging repate yags of $2 trillion of profits of the u.s. multinationalists abroad. that investment would come back and create value-added activity in the jobs that go with it. how about curbing excess regulations that raise the cost of maintaining businesses without any marginal improvements in safety, social, and environmental outcomes.
how about advocating retirement protectionists occupational licensing? it could be encouraging voters to look at the states for evidence of which policies work best to attract investment and create jobs. there's a reason that more jobs are created per capita in places like south carolina and tennessee than in michigan and ohio. so there are really no circumstance under which it makes sense to curtail the growth of the size of the pie. nothing that can't be possibly considered illy get mate. the problem to solve is not trade. i've wondered aloud sometimes to the discomfort of people in the room why president obama didn't
challenge challenge nancy pelosi and harry reid. why he didn't do it more rigoro rigorously. i wondered out loud, sometimes to the discomfort of people in the room, why president obama didn't challenge tpp coarchitect hillary clinton when she decided she was against the tpp. i think those decisions to yield to politics and the political status quo of representing missed opportunities to make the case for trade in the highest level. missed opportunities, i think, that made ambassador fromman's jobs more difficult. missed opportunities that jeopardize all the hard work done on tpp and ttip and other trade initiatives. perhaps it's not the most cheerful way to introduce our keynote speaker, but to kick off this morning's events, i have a special guest who knows more about the tpp, than probably any other american. it's a real honor and privilege to introduce the united states
trade representative michael fromman. ambassador fromman lead the obama policy since 2013. he's been with the administration since the beginning in 2009 before helping the president regulate international policy and different positions in other agencies. ambassador fromman brought home the tpp agreement last fall and it was signed by the parties in february of 2016, and if it is to be ratified this year, implementing legislation will be need to be introduced very soon. without further adieu, to discuss those plans and why the tpp is a good deal for america, please help me welcome michael fromman. [ applause ] >> thanks very much. i feel a little bit like one of
these isn't like the other, you know, coming from the m here. there are a number of things we don't agree on, but here is an area where we might well agree on. the importance of moving this forward, and so i welcome this opportunity and thank dan for the invitation and the opportunity to meet with you. and i'm delighted to see one of my predecessors here in the front row here. one of the great things about this job is how bipartisan it is. i've gotten great advice and support from all of my predecessors and i thank ambassador yoder for being here. i want to thank the trade team at cato, dan, simon, bill, dan for bringing their expertise on these issues to the debate. we welcome this report that is being issued today and look forward to reading it and the independent analysis that cato does on this issue.
tpp will be the largest trade policy advance in more than 20 years, on a wide range on important policy goals. the results very well mesh with principles common to conservatives, liberals, and libertarians alike. if you're interested in reducing taxes, promoting market-based rather than subsidize-based competition, internet freedom, a and. it will increase the standard of living of low and middle-american who spend a portion of their income on consumer good. it will help maintain the competitiveness of u.s. manufacturers who rely on important inputs and components. an american company selling cosmetics or cars to vietnam will find new opportunities since tariffs of 20 to 70%
vanish. the proprietor of a asian grocer will save herself and her customers money. tpp will be the first agreement since 1994 to cut the subsidize prohibiting fishery subsidizes that contribute to overfishing. that's a historic achievement for the removal of a practice and as a conservation measure. this is the first agreement to take on the issues of the digital economy. preserving the integrity of the internet and the right to move data freely across borders. and prohibiting efforts to require the localzation of infrastructure and other forms of digital protectionism. tpp will, for the first time, take a comprehensive approach to imposing disciplines on sate-owned enterprises to make sure when they compete against our private firms they do son a fair and level playing fields. tpp will small businesses.
these are just a few of the highlights. there have been a number of studies done on the benefits of tpp from the peterson institute to the international trade commission to the american farm bureau. they have found that tpp will support more well-paying export-related jobs, add consumer purchasing power, and spur economic growth at home. the peterson and the itc, which conducted the two major modelling studies of the agreement, both find that the majority of the benefits of tpp will go to workers through higher wages. now there's a great deal of anxiety among the american people evident in the current election dynamic, not to mention across the world in the introduction. there's concern that other countries don't follow the same rules we do but instead act unfairly. that the benefits of growth have been unfairly shared. that the system is rigged in the favor of the few. it's important we not ignore these concerns.
they are real and legitimate. the question is, what to do about them. most economists will tell you the technology is more to do with the changing nature of the work force than globalization but they both contribute. the problem is, we don't get to vote on technology. nobody votes on the next generation of computers or whether robots will be deployed in the workplace. nor do we really get to vote on globalization. globalization is a fact made possible by the containerzation of shipping, the spread of broadband, the opening of countries like china, and eastern europe that used to be closed to the global economy and are now part of it. globalization is a force. if you can't wish it away, or put the agree knee back in the bottle. what we get to vote on are trade agreements. so they become a magnet of concern. a scapegoat for a broader set of factors that contribute to economic anxiety. but it's important not to conflate trade agreements with globalization. globalization is impacted the
workplace. trade agreements can be part of the solution. trade agreements allow us to shape globalization to our advantage. they're the vehicle through which we help write the rules of the road for the global trading system and do so in a way that reflect our interests and values. just yesterday the international trade commission released a study on the effects of u.s. trade agreements since 1984, when we negotiated our first with israel. it found that inning a fwrat our bilateral added american jobs and increased wages, giving consumers lower prices and greater product variety with the largest purchasing gains going to low and middle-income americans. we start from the fact that the u.s. already has one of the most open economies in the world. in large part because of decisions made decades ago and supported by 12 presidents, six democrats, six republicans. our average tariff is less than
1.5%. 50% of all u.s. imports come in duty-free. we don't use regulations as a disguise barrier to trade. when we look abroad, we see markets shielded by higher tariffs and opaque and slanted regulatory systems. the transpacific partnership we can level the playing field by removing barriers to the markets, raise standards in the markets, and as a result increase our export-related jobs which pay up to 18% more on average than non-export related jobs. right now we compete with low-wage countries all over the world. tpp will open some of the largest and fastest-growing markets to made in america manufacture goods, agricultural goods and services, and raising standards in other countries tpp will help level the playing field for american businesses, workers, farmers, and ranchers. there's something broader at issue in whether and when tpp moves forward. that's the rules based system itself. that system helps japan and
europe rebuild after the second world war . it allowed developing countries such as south korea and brazil to become emerging markets. it helped lift hundreds of millions of people out of poverty. here at home successive rounds of trade liberalization estimated to add $13,000 per american household. we cannot and should not take that system for granted. that system is under attack as more status and alternatives are being promoted abroad, calls for isolationism and protectionism at home. from our perspective, it's vitally important we maintain and strengthen the rules-based system where every country has certain rights or all countries are expected to play by the same rules. if they don't, whether there's a fair and equitable resolution of despites. big countries can't push little ones around. that system is key to maintaining a stable and pros r prosperous asia-pacific region and key to ensuring that the
global economy works for all americans. it's critically important that we not just sit on the sidelines but proactively shape the global economy in a way that reflects those interests. if the united states were to turn inward, the results would be economically devastating. historically has proven beyond a doubt that protectionism doesn't work. raising tariffs on our trading partners would only lead those countries to respond in kind and block our exports. that is a trade war and we know that no one wins in a trade war. turning to protectionism wouldn't increase employment here, it would reduce it. it wouldn't boost economic growth, it would drive the economy into recession at worst. and we know this from experience. 1930, congress passed and president hoover signed the tariff act which is essentially walled off the united states from imports. hoover's view it was essential for an era in which he believed americans could not compete
against low-wage countries in europe. the thing it was raising tariffs would lead to a resurgence in manufacturing employment in the united states, in fact, the opposite happened. we wound up with fewer jobs, we may have had a sizable trade surplus, but we had the great depression. not only to high tariffs worsen the great depression, but kbribted to the decline of the global economy which lead to the rise of nationalism in europe and shea. as president reagan said, protectionism will not open markets to u.s. protects but close them. it would mandate the united states, violate many of the basic rules of international trade, and expose our most productive farms and industries to retaliation by other nations. the economic stakes and isolationism are clear. so are the strategic stakes. rejecting tpp would undermine u.s. leadership, not only in the asia-pacific region but around the world. our allies couldn't help but question whether we had the will
to make good on our commitments. as singapore's prime minister put it, if you're not prepared to deal when it comes to cars and services and agriculture, can we depend on you when it comes to security and military arrangements? in fact, now more than ever, it's important we move ahead with the approval of tpp. earlier this week i was reading a piece on the opinion pages of the wall street jounl, and the author was describing his sentiment after participating in a discussion of the impact of brexit on europe. and he said the fate of the entire post war order hangs in the balance, with it the prospects for democracy worldwide. without vigorous american leadership, the prospects are not bright between the my grant crisis and internal challenges, there's a serious risk that europe will be preoccupied at least for some time. we cannot afford a self-inflicted wound to american leadership at the same time. the good news is that as i meet
with members of congress, they're increasingly appreciating the benefits of the economy and the costs of delay. the costs of delay are high. we're already seeing our market sharing priority products eroded by other countries that have free trade agreements in place. they estimated a one year delay would impose a $94 billion cost on the u.s. economy. that equates to about a $700 tax on every american household. more over, we don't get it done soon, the other asia-pacific countries aren't going to sit around and wait for us, they'll move on. as new zealand's prime minister put it, these economies aren't going stand still beijing will step in and fill the void. so the choice isn't between tpp and the status quo, it's between tpp and what is likely to evolve in the absence of tpp. as other countries move forward, our businesses stand to see their market share in the key
countries shrink rather than expand. instead of seeing our rules in place, we'll face adverse implications for the free flow of data and the integrity of the internet, for disciplining subsidizes and stealing skbriezs, and cooperating against counterfeit medicines and consumer goods. today our country that is a choice. we can play a leadership role in writing the rules of the road for 40% of the global economy or leave the job to others whose values and interests who don't necessarily align with ours. our failure to move forward would weaken us economically, and undermine american leadership. cato's report is an important contribution to this debate providing further evidence of how valuable tpp will be to the businesses, workers, farmers, and ranchers in the united states and to america's leadership in the world's fastest growing region. we're grateful to cato for their support of this agreement, for moving forward with the ratification. thank you very much for having me. i'm happy, actually, to take questions for as long as i can. thank you.
[ applause ] yes? >> reporter: some of the major -- [ inaudible question ] i'm wondering how yo and your office think about the intersection and the sovereignty at the same time >>well, i think you put your finger on it. i think sovereignty is very important for all goods. we wouldn't give up our regulatory sovereignty, no other country would give up theirs. we have a process here. we pursue regulation that is
open and transparent where the public can provide comments, that staff regulations are put out for the comments, and where regulators have to take the comments into consideration, and so a lot of them are trying what we're doing through tpp and the other trade initiatives is help encourage other countries to have more transparent and open processes. we're not going to comprise our regulatory sovereignty nor will they comprise theirs, but if it's a more open process where we can make sure that everybody can participate, we have confidence we'll end up with a better regulatory practice. yes? >> it seems to me you said you have thousands of tariffs on exports in the united states, and yet my understanding from reading the constitution is that exports are forbidden to have
tariffs on them. >> these 18,000 taxes are the tariffs that other countries have on our exports. so for our non-fta countries, these are the tariffs we currently face. >> thank you. >> thank you. yes, sir? the gentleman in the fourth row. >> i was wondering for you could talk a bit about where we are with congress and tpp,bio logics and the financial issue. if you can speak to the brexit a little bit. i know you met with commissioner malmstrom yesterday, and i was wondering if given the state of the european union a ttip deal is possible. >> in terms of the status of tpp with congress, we are continuing
to consult with leadership of congress and the leadership of the trade committees, ways and means committee, and the finance committee to determine the best way to move forward. we are, at the same time, working to resolve outstanding issues. we've been working with the dairy sector and they're now supportive of the agreement with pork producers. they're supportive of the agreement. there's been a lot of good work done between treasury and the regulators on the financial services data flow, and data localzation issue. i think where that is heading and has basically been a resolved in a positive way and we're seeing that come to a close. that leaves, of course, buy logics as a very important outstanding issue. we're continuing to consult with industry and with the chairman hatch and others in congress to try to find a way forward on that as well. i think on brexit, i did see commissioner malmstrom this
week, when she was here. that's part of our ongoing negotiation. our teams are meeting almost constantly now. we're seeing each other every few couple of weeks. our chief negotiators are seeing each other a couple of weeks. we have another formal round coming up. we're making good, accelerated progress, i would say, over the last eight months in terms of resolving issues. obviously europe has a lot on its plate at the moment between brexit, the migrant crisis, the rising level of euro skepticism across europe. we hope they have the necessary focus and political will to be able to take the necessary decisions to be able to reach an agreement. our goal remains to do everything we can to reach an agreement this year. >> would it be accurate to
characterize the data fix as being in two parts to have the treasury part that deals with, you know, the trading services fwreemt and there are some tpp countries that are not covered by that. can y talk about what you'll do to get the countries, how receptive have they been to living up to the terms of the treasury proposal? >> we're currently having conversations ourselves. treasury with the industry and make sure that we are on the same page in terms of the way forward on this issue. we made it clear that in this, as in other areas, we're engaged with our tpp partners as part of the implementation effort to make sure that we're doing whatever we need to do to address any outstanding concerns, and this will be one of the issues i imagine we'll be engaging with some of our tpp partners as well. the gentleman in the fourth row.
>> the u.s. itc report, it's an enormous comprehensive report, 800 pages. and, you know, full of assessments of various pieces and lots of positives for the american economy. i just -- there's one sort of bottom line number that is in there that sort of feeds into the negativism about trade and the u.s. economy. i wanted to ask you how you respond to that when it comes up in public since this is an official government report. it shows a very slight decrease -- increase in the u.s. trade deficit. in other words our imports rise a little more than our exports. our income grows the wages goes up, employment goes up, but there is a very slight, i mean, tiny decrease in our trade surpl surplus. you know, that one little point would be something that critics of the thing could take and run
with in the way we've seen in the political this year. i'm curious how you in your official role respond to that in overall assessment of the agreement. >> thank you. it's important to clarify. it was not a conclusion of the report. that was an assumption of the report. the report assumes that the trade deficit remains static as a percentage of gdp. since gdp is expected to grow, the trade deficit itself is expected to grow. they take that as one of the base assumptions of the model. what it points to the studies from the peterson institute, and the itc study. and both institutions put a tremendous amount of work into it. i think they're worthwhile studies but models have their limitations. there are assumptions made conflated there. thank you for giving me a chance to verify it. gentleman in the back.
>> hi, ambassador. i wanted to ask about sort of the context of the foreign policy objectives that might be tied up with the tpp, and i'm wondering for you can speak to that, especially as your office is under the executive branch attempting to enforce for the nation. we have a history of these merchant republics. we go back to athens, we go through the independent maritime republics, the dutch, the british, so on and so forth. none have the greatness of population and resource that we in this country do to exploit ourselves and develop our own economic interests here at home. i'm wondering to what extent you see the tpp as being able to benefit both us as a nation attempting to drive value from trade around the world, and also
a nation that has given such a great wealth of natural productivity in terms of our population and our resources. >> so let me take that in two parts. first, the foreign policy question you asked, and then perhaps the economic strategy piece. you know, on the foreign policy side, first. it's our view that trade agreements, first and foremost, must be justified on their economic grounds. the impact they have on growth, on the strength of the middle class, on wages, on jobs here in the united states. but there is no doubt that tpp also has tremendous strategic benefits and foreign policy implications. we see that across the region in asia that -- and i cited prime minister lee as two leaders that spoken out. other leaders have as well. these countries -- we're a pacific power. these countries very much want us to be involved in their lives. they want us to be embedded and
committed to the region. they see tpp as the most concrete manifestation of the commitment, and a commitment that has broader spill over effects into political securities, strategic issues. that's why when we hear from leaders in the region and others in the region they are -- they very much are focussed on us delivering on tpp because they say if we don't it'll be a mortal wound to our leadership in the region. and this is litically important to our own economic well being, but we also have broader streejic issues at risk there as well. i think on your second question, we are blessed with a large country with great natural resources, and we have so many other strengths going for us. our entrepreneurial culture, our skills work force, our infrastructure, even though it needs to be improved, but we
have infrastructure. our trade agreements are, in some ways, the final piece of the puzzle that can help drive even more economic activity to the united states. i've had lots of companies come through my office, many european companies, who said some version of the same story. between those strengths in the wus, the rule of law, the entrepreneurial culture, the skilled work force now the abunt sources of abundant, cleaner energy. if we're able to complete tpp and ttip and put them in place, we'll have free trade with two-thirds of the global economy. and that makes the u.s. the production platform of choice. the place where people want to put their next factory, their next facility to serve, not just the wide and very attractive u.s. market, but for exports of latin america, to asia, to europe. we're right on the cutting edge of being able to deliver on that. and that's why this is so important. this is not just about improving exports and improving trade,
it's about also drawing investment and economic activity to the u.s. as well. the woman in the fourth row her here. >> thank you. you've been very specific with the ttip about promodelling the american procedures act to the eu. what kind of administrative reforms are you expecting in the tpp states along the same lines? >> we're not trying to export the administrative procedures act to any other country. i think europe, for its own reasons, as we going through a process of looking at regulatory reform, the initiative underway athe commission called better regulation that moves in the direction of increasing transparency, participation, accountability. those are the sort of principles we have put out there that we think a regulatory system should be transparent. should be participant story
where a wide range of stakeholders, whether it's businesses or es or labor or n. society be able to provide input. and where regulators have to make decisions based on science and evidence. that's with a we're looking for. i think the european union, for its own reasons, is moving in a similar direction, and we're hopeful that ttip can help constituti institutionalize that as well. yes, and then i'll come back over there. >> thanks, ambassador. thank you for bringing home a strong tpp agreement. could you talk a little bit about the challenges you face on trying to get tpp through the congress and other important issues you're working on. when a leading presidential candidates, including from the president's party, seem to be on an anti-trade and anti-tpp
agenda, however well founded. thanks. >> first of all, i think trade votes, and you know this from your experience, trade votes have been difficult always. we've had robust trade politics here since nafta for more than 20 years. and this particular political environment trade is playing perhaps a more significant role than i think people expect. i think the good news is as i'm up on the hill talking to individual members of congress, and i'm basically up there whenever i'm in the country, and th they're here, i'm meeting with them individually or small groups. they're fundamentally making their decision on tpp based on the impact of the agreement on their constituents and stake holders they care about. as we walk through the agreement with them and they learn about what is in the agreement that is of value to their constituents and stakeholders, we are finding a very receptive audience. so i feel confident that at the
end of the day, as we consult and work with the leadership of the house and the senate on what the most conducive window of opportunity might be for taking up tpp that the support will ultimately be there. one more. i think there was a gentleman here -- do you have a question? >> thank you. this is along the same line. can we just talk a little bit more about the public sentiment against free trade and the presidential candidates their opposition to tpp >>well, like i said in my remarks, i think there is a lot of very understandable out there after 15 years of wage stagnation, widening income inequality. there is a degree of economic
anxiety out there both in the united states but also et. cetera where around the world. i think what the debate comes down to is what to do about it. as i laid out, our view is very much if you do nothing or you close yourself to the world, or you put up walls and protectionism, you're going to make the situation worse. if you're proactive about using our trade tools and our trade agreements to shape globalization, to open other markets. since we're at 1.5% average tariff and vietnam has a 70% tariff on our cars and 55% tariff on our machinery and 35% tariff on our chemicals and 40% tariff on our poultry. we can eliminate the tariffs. we are creating net new opportunities for the american workers and farmers to produce here and sell there. if at the same time we can raise standards of these other markets to level the playing field, make sure they've got a decent
intellectual property rights that make sure that we're raising labor and environmental standards then we have a der we're confident our businesses, our workers, our farmers can compete and win if it's a fair and level playing field. that's what being proactive about trade agreements means. that's what our trade strategy is about. thank you very much. thank you. [ applause ] >> we're going to jump straight into the first panel. we'll wait for the speakers to come up.
>> other questions of him or us, raise them via twitter use the #catotpp. are we good to go? so we're going to move along to the first panel. it's called "grading the tpp: what to like and not like about the agreement." i'm going to play two roles. i'm a moderator, but i'm going put my finger on the scale a little bit. i'm going to give an overview of the paper that we did and the
scoring methodology, but at the outset let me let you know that the formal paper is not ready yet. it will be out later in the summer. what we've done is we've extracted from the paper what we've -- the scores, the methodology, the scoring rationale, and that abstract was available outside. there we go. but if there were no copies left and you want an electronic version, you can go to this url here. there's a pdf of this abstract of the paper. so i'm going to give a bit of an overview, and talk about the scoring. i'm going it turn it over to bill watson who is a trade policy analyst here at cato. he's coauthor of the forthcoming paper, and his bio is on the cato site, you know, to save us time i'm not going to introduce everybody all that formally. then we'll go to simon lester, a
coauthor of the paper, and his bio is also on the cato site. then we're going to turn it over to derek scissors who is a resident scholar at aei. he's been doing trade policy and u.s.-china economic policy. derek's bio can be found on the aei website. you won't need to go there to learn about his reservations about the tpp i'm sure he'll gladly share them with us. i think derek's analysis was one of the first published after the text of the agreement was released. so right out of the gate derek expressed reservations. we'll find out whether he softened his positions at all. over the past couple of years, libertarians and other free traders questioned why or how i can support the tpp. it used to be the case i would only get my hate mail from the
left. i get some angry questions. but libertarians were asking the same things. how can you support a free trade agreement, a managed trade agreement that is full of corporate giveaways and excessive rules and global governance? i said i haven't taken a position yet with respect to the tpp. we're going to evaluate it and get back to you. it is certainly true it used to be the case that trade agreements were more about border barriers because trade restrictions were mostly found at the border, but with the proliferation of transnational supply chains and cross-border investment, the nature of international competition has changed. now you have foreign headquartered companies competing here in the united states next to u.s. companies and vice versa. so the nature of protectionism has changed. it's not just a border concern anymore. protection i feel can be found in national regulation, performance requirements, local
provisions, investment benchmarks, intellectual property laws, and on. so as a result modern trade agreements have also evolved to try to address the new reforms of discrimination. so whether free traders should rejoice in this or recoil depends. you know, about the broadening of the scope, it depends on a few things. the whole pound of trade is to expand the size of the market to enable greater levels of specialzation, and economies of scale and reducing tariffs, obviously, is one way to do that. it's probably the classic way to do that. to facilitate cross border integration. that integration will also be hindered if enterprises have to deal with two sets of resumelts two sets of standards, have to comply with different structures of governance. so there is some argument, at least, that the harm monozation
of product standards or equivalence of regulations, similarity of ip regimes, things like that might be important to expanding the size of the market. it's this latter form, this newer form of trade liberalization that sort of defines modern trade agreements, 21st century agreements. it's why the tpp, i think, is controversial and contentious. i think there's legitimate grounds to question the direction that our trade agreements are taking us. and to be vigilant about what it does. so for free traders the ideal is free trade. no border barriers. we don't like rules that are tangly related to trade but violations that can be invoked to restrict trade.
measured against the standards the tpp lends 5500 pages of explicit rules and exemptions would not pass the free trade test. it's a managed trade agreement like all of our trade agreements. but, you know, expecting the tpp to deliver free trade, i think, is a bit unrealist piic. the outcome is politically unattainable. holding out for the ideal, would make the perfect enemy of the good when the good can be better than the status quo. so the question we ask, and in starting this paper, is that if the tpp delivers more liberalization than restriction and can be shown to likely enhance our economic liberties, and better approaches are unrealistic, why not support the tpp. we set out to evaluate the deal. i'm going to show you the slides. there's a lot of text here.
i promise it's the only one with text. better perhaps to, you know, go online and read it yourself, but we evaluated the chapters, the rules, and the provisions of each chapter according to the questions, through the prism of these questions, and we assigned scores of -- from zero to 10. so zero would be restrictionist, 10 would be free trade, five would be knew really a. we didn't assign any zeros or 10s. actually no 1s or 9s either. we evaluated 22 of the 30 chapters. we assigned three scholars to each chapter, and then we discussed each finding and we debated and we reached consensus. sometimes it was hard. some of us are a little bit more stall wart on some issues than others, but we reached a consensus on the scoring.
and these -- this is a table of the chapters. and we identified the nature of the chapter. some of the chapters were administrative or suggestive meaning there aren't real serious commitments there. there are ideas for moving forward. hard to measure whether the terms or liberalizing or not. in some cases they might be liberalizing. there's no commitments that are firmly made. and we talked about we identified market access and rules and governance. so this is the presentation of the scores in ascending order of cha chapter. it's a little congested. this sorts our results by deskending order of score. what you see is five of the 22 chapters received a score of 8, which was the highest score we gave to any of tchapters. and the lowest score was 3. the mode was 6.
these guys are going to talk specifically about some of these things. what we recognize is important to do was to come up with come with sort of average scores by the nature and -- i'm sorry. let me describe the tier. we identified some chapters that we thought were more important than others, more significant to answer the question as to whether or not the agreement f liberalizing. eight of them are first tier and 14 of them are second tier. this just shows the frequency -- this is graphic depiction of the table you just saw. you see that most received sixes. the second highest was eight. they're scattered from three to eight. this one breaks down by market access versus rules. we found the market access chapters to be better on average than the rules chapters. this is the final table that you need to see.
so we sorted it by market access, rules and governance and then by tier. i don't know if you can see this, these average scores here. if you can't, i will just tell them. we have a simple average score, but that doesn't really make a whole lot of sense. it makes sense if every chapter should be weighted toward the final the same way. there really isn't a good way to come up with an average score for the whole agreement unless you break it down by segment, by nature, by tier. so 5.82 was the average score. on a simple average basis. since it's above five, we find that the agreement is on net trade liberalizing. market access is considerably better. 6.18 versus rules, 5.45. then we did a simple average of the first tier, which is 6.63.
so we're not trying to rationalize support. we just figured there's different ways to slice and dice this. and that any weighting -- we did do a weighting, any weighting is prone to subjectivity. we weighted the tier one scores -- we gave it twice as much weight as the tier one scores. and then the one at the bottom takes into account there were no tens. that we weren't going to assign anything free trade because there was no chapter indicative of free trade. instead of over ten, i converted it to over nine come up with a 6.7. that's kind of a fictitious number. weight it as you see appropriate, what's important to you. in the paper, we go into a lot of detail about the rationale,
the summaries of the chapters, assessments, pros and cons, that will be out soon. the rationales will be available with this paper. but i am going to stop there and ask bill to come up who's going to talk more specifically about the market access stuff. thanks. >> thanks, dan. i -- i have the enviable task of getting to talk about the good things in the tpp and tell you how good they are. when we're talking about market access in a trade agreement, this is the core of what a free trade agreement ought to do. we can talk about, you know, new issues and new rules, but there's still a lot of work left to do getting rid of tariffs and
quotas. free trade agreements like the tpp are the best way we have at the moment of dealing with that. so the essential first question we need to ask if we're going to decide, you know, going to balance the pros and cons of the tpp is how good are the pros. how good is the tpp at this core job of liberalizing trade by eliminating trade barriers. and i think what we informally, what i -- the score that i would give it a pretty good. and let me start by going through the general market access tariff cuts looking at just tariff treatment in the tpp. this is the basic stuff. and you see from a -- from a bird's eye view looking broadly, the tpp's tariff commitments are
strong. we're getting roughly on average 90% of tariffs going to zero immediately upon implementation. the remaining 9%, right, there's going to be a 1%, just about 1% of tariff lines still sitting around. within 15 years, we'll have 99% liberalizing. 15 years is a long time. it sounds like a long time to me. and it's not going to take 15 years for all of them. just the last little bits in 15 years. this is -- you know, it's certainly not immediate free trade. it's not even immediate free trade between the members of the agreement. but it is better. it's better than a lot of past u.s. agreements and it's certainly better than other agreements that other countries are negotiating. the rcep agreement, another
large asian free trade agreement, also china and india, isn't getting anywhere near 90% tariff reduction. this is a strong agreement going into the region getting broad tariff elimination. so having said that at the basic level it's good, there are still some weaknesses, right? i say 99% of tariffs are going to be liberalized, that means there will still be some protectionism. that 1% that is left is in essence the protectionist policies that were so politicly unstoppable that even the tpp could not achieve a reduction or an elimination of these policies. and that's unfortunate. it was hoping that the tpp, being such a large agreement, could muster the political will, the political will could happen
in that agreement to get rid of some of these programs. what we see is a little bit increased trade, but not really liberalization. the one example that we'll hear a lot about from the u.s. side is auto tariffs. the u.s. imposes a 2.5% tariff on cars from japan and a 25% tariff on trucks from japan. and those will be phased out between 25 and 30 years from that. that's incredibly long time. that's basically never. a generation from now. i mean, when -- when, you know, 29 years from now when all of my colleagues are retired and i will still be talking about trade policy and telling people about the tpp ratification of 2018 and talking about isn't it amazing that we used to make cars in the united states and we had these tariffs. you know, and my grandchildren will say, what's a car?
[ laughter ] 30 years from now, incredible amount of changes will go on. i kind of think of that as it might as well just be never. similar issues with tariff rate quota. still quotas in place for u.s. sugar. the tpp had an opportunity -- there was a lot of hope that there would be major reforms in japan's agriculture markets. highly protected markets. and a lot of benefit could go to japan. japan would benefit immensely from being able to cut out these programs. what we see is, a little bit of liberalization, some more access for imports, but not the kind of major reform that would have made the tpp particularly great. if we could have gotten rid of these programs, i would be saying the tpp is amazing because we got rid of these
programs. the sort of sticking points where the tpp wasn't able to overcome. so we have broad liberalization and the tariff cuts -- the liberalization from the tariff cuts has to be weighed against the rules of origin in the agreement. all preferential trade agreements have to have rules of origin. you have to know which products it is that are going to get the zero tariffs. you lower the tariffs for products from japan, what is a product from japan. how do you determine which products get that preferential treatment. the way we do that is by looking at regional content. how much of the value of the product was added or created within the free trade zone. now, if you have particularly strict rules of origin, you can do a lot of damage to the liberalization commits you've already made. if you want to import a -- you
know, a product from canada, it has to be 90% of the value come from canada, what it means is that any products that rely on imported products from outside of the region, imported parts, they won't be able to get good tariff treatment. and when you go through product by product, the way that we do in free trade agreements to set specific rules of origin, there's a lot of opportunity for rent seeking to create a rule of origin that benefits a particular group of companies and gives them an advantage over their competitors that might have a slightly different sly chain arrangement. so you privilege one of those over the other. the tpp's rules of origin are, i'm happy to say, generally more liberal than previous free trade agreements. if you look at the korea, fta,
colombia, australia, you -- and compare it with the tpp, you'll see it's not a hard and fast rule, but generally, the tpp's rules origin product by product are about 5% lower. now, for a specific product where the subject of a lot of negotiation, that's going to be different. in those cases, the tpp is in some ways a lot better because you had, you know, 11 countries working on this. so sometimes the rules of origin ended up really well. that's the case with autos. it's become a sticking point in the ratification fight that the tpp's rules of origins for auto parts which are about 30 to 54% on the product are a lot better than nafta's rules of origin for auto parts. now, nafta was responsible -- give nafta credit for integrating the north american auto industry, creating a single
industry that spans three countries. but it protects that integrated industry from foreign competition. and the tpp will, if we have these more liberal rules of origin, open up for a lot more competition in that market. and so we've seen hillary clinton has singled out auto parts rules oregon engine as a complaint. so if we are ever going to renegotiate the tpp, if that gets done in the next administration, this may be one of the issues that's on the table. the -- and let me just quickly mention the tpp continues the practice of adding special protection for textiles, u.s. textile industry through special rules of origin for textiles and apparel. if you want to import clothing into the united states duty free it needs to be made from fabric
made by american textile countries. the tpp just continues that policy the way that past agreements have. another important area for liberalization is government procurement. governments, particularly foreign governments in the developing world, buy a lot of stuff. and they often do so while privileging domestic companies. we do this in the united states by american rules. if you want to do business with the government, you need to use domestic products or be a domestic company. there is a wto agreement that seek to reign in some of that practice and to liberalizing those markets. the tpp doesn't really go very much beyond those. we're not going to see a lot of new liberalization in the united states, but for vietnam and malaysia who are not members of the wto agreement of the
government procurement agreement of the wto, the tpp will be a significant inroad for them into legalizing and rationalizing their government procurement policies which will be a benefit. and time finally, let me talk a services. services is sometimes a little awkward to talk about from a trade perspective. it's a very important part of global trade. it's a very important part of what the united states is trading and what we're producing, providing services and exporting those services around the world. but it's not something that goes through a customs office. it's hard to quantify. and it's hard to liberalize because you can't just eliminate a border barrier. what we do and what's been done at the wto 20 years ago with the agreement is to set up rules of
nondiscrimination. you can't discriminate against foreigners and to prohibit a variety of quantity limitationi on how many services can be provided and how many people they can hire. the big contribution that the tpp makes in services is like many other free trade agreements, it has a negative list for services liberalization. where at the wto, the rules only apply when -- when a country has singled out particular industries or particular sectors for liberalization. the tpp applies those same rules to all service sectors unless you mention them by name. and the -- so, you know, this is where sensitivities come in again. we see the jones act is an area where the u.s. has carved out
exceptions for itself so it doesn't have to liberalize maritime services and commercial shipping and airline services. and the big benefit from services liberalization in a trade agreement is that you don't have -- you don't have the same kind of preferential or trade diversion problems necessarily because when you eliminate discrimination in a services market, it's usually done on a non-preferential basis, not singling out particular countries. so when a country opens up its services market, it tends to do it for all countries, not just tpp members. so here's all the market access chapters of the tpp. you can see with the exception of textiles and apparel which just shouldn't exist as a separate chapter, we're getting positive scores. some really good, most a little good. and i think the general -- the
general thrust of the tpp for market access better than most u.s. ftas, certainly better than other ftas in the region. a step forward in u.s. trade policy, but, you know, not enough to be amazing and overcome some of the political barriers that we already knew existed. thanks. [ applause ] >> so i'm going to offer more of the same of what dan and bill have already given you. that's not too surprising. we've all chosen to work here together. we tend to agree on these things. what we at cato are looking for in a trade agreement is trade liberalization as much as possible. other people might focus on other issues. people talk about foreign policy, important part of the pivot to asia and u.s. foreign
policy. president obama has touted this agreement as being the most progressive in the industry. there are provisions on intellectual property that some people like. for us, none of these things are that important. this next slide i debated whether to show, but i'm committed to it, so here it is. where's the liberalization. millennials out there might have to google that reference if you didn't grow up with it. so -- so when evaluating a trade agreement, the two questions for us are how much liberalization is in there and how does this liberalization balance out against the regulatory and governance issues that are also in there. bill focused on the good liberalization. i'm going to talk about one final aspect of that liberalization, then i'm going to get onto the regulatory side where i'll be a little more
critical. i'm going to start with the international trade commissions report which was one of the good economic studies on this. you know, we've looked through it. the itc's given us good economic analysis. let's see what liberalization we can find in there. we start off with baseline numbers they give us about the amount of gdp or real income increases. it's a little disappointing to see this small number. let's look at this closely and let's see if we can find some liberalization. and the itc's report, they divided up the liberalization part into three aspects. the tariffs, tariff rate quo toes and non-tariff measures and liberalization of investment. bill talked a good amount about tariffs. he kind of ran out of time. what i'm going to focus on now is liberalization of investment. and this -- this -- this slide just shows a breakdown of the
amount of liberalization in the goods provisions, services provisions and investment provisio provisions. i was looking at the investment provisions, the itc breaks down the regulatory restrictiveness index, how much restrictiveness there is for each tpp country in 2014 and then how much there will be after the tpp. what struck me, that's why i've highlighted it, is how new zealand's restrictiveness was quite high and went down considerably. this table shows something similar. you may be able to see that for just about each sector, new zealand is fairy restrictive. what does the tpp do about it if there's something good here i want to highlight. turns out there's a pretty simple answer which is that there's an approval process for foreign investors in new zealand
that currently, prior to the tpp going into enforce, for any investment under $100 million, it's automatically approved whereas above $100 million, it had to go through this screening process where the new zealand government would look at things like the good character of the business and the business experience. what the tpp does is raises this threshold from $100 million to $200 million. so that's good. what that means, it's easier to get investment approved in new zealand. in the past five years, there were 87 applications with investments above $100 million, and i think it is 45 of them were between $100 million and $200 million. after the tpp goes into force, investors at this range, and there are many of them, will have an easier time investing in new zealand. in our view, it would be better if that threshold were even
higher, but that's what we have. this is some good liberalization there. we wish it would have gone further. you put all of this together, we see a lot of good liberalization in the tpp. there may be better ways to do free trade in an ideal world, but this is the real world and what the tpp has given us is something that's pretty good. but on the other hand, this isn't all you have in the tpp. so what i want to do now is go to the other side and make some critical arguments about some aspects of it. dan has earlier in his talk gave a nice breakdown. i don't want the slide to ut up there again showing you all the different tpp chapters. it's pretty clear that we think most highly of the liberalization ones and moderately positive or negative about some of the ones that deal with regulatory or governance issues. i'll go through a couple of them
with you and explain our thinking about this. or at least my thinkings. we don't all agree on everything here. first issue, technical barriers to trade, sanitary and fitosanitary measures. those of you trade experts out there will know what i'm talking about here. but there are wto agreement provisions on both of these issues. technical barriers trade basically says that product regulations can't be discriminatory. sanitary rules say that food safety measures have to be based on science. so, the tpp has rules on these same things. the first point that i want to make is that because we already have riles at the wto that say something very similar, i'm a little skeptical that the tpp will do much more than has already been done. if there are complaints about another country using food safety measures to restrict
trade, which there often are, governments have in the past gone to the wto. i'm thinking in the future they will do the same thing so i'm not sure that the tpp adds that much. there are, especially in the issue of technical barriers to trade, there are annexes that cover specific issues in more detail. i will show you one of them. as you can see from the text, it's complicated. there's debate about what this particular provision means related to governments requiring private companies to turn over private keys in matters of encryption. so it's hard to say that these rules are liberalizing. it's hard to know what they actually do at this point. there's nothing necessarily harmful in these technical barriers to trade and sps rules. the question is more how line ralizing are they really. that's why we gave it a six. nowhere near what we say from the market access provisions. another issue that's highly
touted is e commerce. i think it's fair to say it breaks new ground. there was talk earlier i think ambassador froman mentioned the free flows of information. there are people who think that this is a great step forward, and it may be. my only criticism of it is it also may not be. i'm not shire based on what i see in the text how much this chapter will do to promote the free flow of information. it may be in five years some government has some restriction on information and challenges the tpp and there's some litigation and we find out a little bit more. in theory, it could do something good. i'm waiting to see before i buy into that. there are rules in the ecommerce chapter that actually require more regulation. one says each party shall provide -- fraudulent or -- each party shall adopt or retain measures regarding electronic messages.
the tpp's actually requiring more regulation. here at cato, we're often skeptical of regulation. we're not against all of it. we've given it a pretty positive seven. but we still have doubts as to what it will mean in practice. now going to -- on the more negative side, i think within the libertarian community, there are different views on the value of intellectual property protection. there's a significant group who's very skeptical of it. i am in that group, i confess. we've given it a four just to give you the most obvious example of somewhere i would say and maybe others would say this goes too far in terms of regulatory and governance impact is that the tpp intellectual property chapter requires a copyright term of life for the author plus 70 years. 50 years seenled fine to me,
maybe even excessive. now we've extended it even further. i definitely see negatives in the ip chapter, and that's why it ended up where it did. the labor and environment breaks now ground by requiring a minimum wage. i know there are people out there who would think minimum wage is obviously good because that means people get paid more. many of us, including myself look at economic studies and say, this actually raises unemployme unemployment, so we're not all excited about a minimum wage, we don't necessarily want to see it in a trade agreement. everyone would like to see better working conditions around the world, including countries like vietnam. i'm also skeptical that using one country's economic leverage to tell another country how to run its economy, run its labor, to adopt -- to have labor regulations or other regulations is propmatic.
labor and the environment we're pretty skeptical of. lastly, let me just mention investments. i talked earlier about the benefits. i'm still pretty positive about those. another aspect of the investment chapter is rules on investor state dispute settlement. there is an area where libertarians and others disagree. the idea that foreign investors can sue host governments when they see regulations that are treating them badly. i think this is more about litigation than liberalization. i think this is one of those areas where the main beneficiaries is the law. as lawyer, i appreciate that. but i don't think it's necessary as a matter of policy. just to reiterate what dan is saying, we tried to carefully look at all the liberalization we could find and all the rules and governance issues and see what we thought of them and evaluate as best as we can now
how we think they'll play out. on balance, we support the tpp. we're always hoping for something better. i'm always an optimist. for now, this is what we've got, and we've given it our endorsement. [ applause ] >> all right. as dan mentioned, i wrote a paper last november right after tpp text came out. i read it basically in one sitting. so i read it again in case i'd gone insane. my paper was quicker obviously and also shallower than the cato study. i would say quicker and shallower in washington, d.c. where clearly i went. my quicker and shallower view is not that different from cato. i'm sorry. i don't mean to be too boring.
i will also talk about different things than they talked about. i agree that it's a positive agreement. i happen to think it's only modestly positive. and i think endorsing a modestly positive agreement, as i expect the business community to do, because that's what they do a myopic. we have done this before on trade and we've gotten sorry. and we're going to do it again. ten years from now, we will be unhappy with these terms. we don't disagree necessarily on the aggregate scoring. we disagree on the implications of that story what the value of the agreement is in the long term. i'll get to the main reasons i would rather be berated by some of my friends in the aid yens in public than in private. let's talk about the things that i don't care about and were not brought up by my leagues. there's no binding currency
provision. there's a reserve currency country in the agreement and non-reserve currency countries in the agreement. if you write one that's different, you're going to infuriate the currency crowd here anyway. we can talk in great detail about that. that's kind of a slam dunk. you can't write the provision to be the same for the u.s. and everyone else. people make claims that currency cost u.s. jobs, they run it through gdp. and the trade deficit that are also. this is just a game. it's a political game and the fact that there's no currency letter in here matters politically. does not matter economically. the agreement shouldn't have one. it's better for not having one that's binding. isds, investor/state dispute settlement, again, who cares. i spent over a decade working with companies in china. you don't go -- you don't take
coherent governments that can retaliate to international tribunals because they will screw you. you talk about it. you hope that you can get their attention. you don't do it. this is just like it's just not going to have that much of an impact except in small countries. i frankly don't care about small countries, i'm sorry. that's why i study china and india. the hatred expressed by some of the people who really criticize isds including in the debate is odd because it -- they now absolutely openly contradicted themselves about brexit. i can't believe the british didn't want to leave their sovereignty to international bureaucrats. so there's a lot of hypocrisy on this issue. in practical terms, isds is going to make very little difference.
if your main thing here is to protect the rights of little countries over the big bad united states, then you care about it. most the people talking about isds don't really care about that. i will talk a little bit about ip because i do care about ip. there's a lot of interesting stuff here. the thing is, in the tpp, the thing is that if we could enforce existing rules, that would be a bigger game than changing them. i'm not that interested in vietnam saying it's going to be become a better protector of ip or other countries that might join in the future. the fda just can't do that. you can't enforce the rules when you write them. and so i don't -- i like the ip provisions. they're fine. but the people talking about this are right that the proof is in the pudding and there's really no way to evaluate that in advance. so those are things that some people think matter. i even think ip matters and yet i don't think the tpp can say a
lot about it. one of my problems with the tpp and where's my clash, because those things are -- we don't really clash here in this panel. where's my clash with cato come from? i think it's a small positive. but i think there are two long-term problems. one of them's a big clash with cato. let's talk about that. that services sector. there's nothing wrong with a services chapter. grade up there for the chapter is fine. but the nonconforming measures on services are literally a foot high. i've already been told i'm just mad i had to read them twice. nonetheless, they're a foot high. there was a negative list mentioned by one of my colleagues, yeah, i suppose, except when the negative list is a foot high. now you're not in a useful negative list. and then a negative list is
prohibitive. the way you get the services chapter to work. this was said before, the u.s. is the most comprehensively -- the itc gives us squat out of this. and they're right. and they're right because the nonconforming measures block any way to model this as a big gain for the united states. the way you would get a gain is that you imagine there would be more services liberalization in the future. i certainly don't think it's convincing now. i don't think adding new countries is going to make things involve less in the way of services exemptions. that's a qualitative statement. it binds no one. when i say that in ten to 15 years, we're going to be sorry. in 10 to 15 years, we will have blown this opportunity.
as the it -- essentially no benefits compared to the size of the u.s. economy from services. the main goal in my mind will not have been fulfilled and we'll have done a big political heavy lift to get squat. the other problem i have is not -- was not emphasized by the panel and it -- it's pe kyculiao my background. it matters a lot politically. it's not a big substantive thing in the tpp because it's not about a tpp party. you might be getting where i'm going here. it's the competitive neutrality chapters and particularly one on -- enterprises and the reference to china. about one senator per week calls me into his or her office and says, i don't think we're going to have a vote, but if there's a vote, what should i think about this. i don't want to advance the protectionist side when i'm
criticizing tpp. i know one thing they latch onto is china. china, china, china. it was impossible for the negotiators to include china in the agreement. and i'm going to do it right now. the rules governing seos are made for countries that want to behave at least so some extent. i'm thinking about singapore. if you judge it on the basis is it going to keep them from being abusive with their two large soes, the answer is it does okay. it's not that bad. . problem is that the countries who don't want to behave with regard to soes and the tpp just fails miserably to restrict them. maybe that's unfair because how could they, they're not part of the agreement. but that's in fact the case. the fundamental thing about soes is they don't fail.
they're set up because the government doesn't want the private sector to engage in this activity. it wants a state entity to engage in the activity. trying to make them act like private firms is exactly the wrong thing to do. there's some implementation designs, how, what the ownership is, blah, blah, blah. it would take me a day to get the entire chinese state sector out of the tpp regulations on ownership and still totally controlled by the state. so we have a fundamental disagreement on what is an important political issue. if you're scoring tpp, i wouldn't expect this to be this enormous weight. but politically and with regard to extension and what i happen to think is a major issue in the world economy, it fails. so, you know, i don't -- you know, the defense of this in my
mind is short-term and it involves external factors. it was brought up before that, you know, some people care about foreign policy here. i don't. if you do, i get it. fine. we just are judging it on different merits. the only thing -- the business community likes it because the business community likes anything that's better than right now and they're not thinking ahead. i'm not that far from cato on this. i really don't see how free traders can like this deal. they can tolerate it. they can say we're going to go backwards under the next administration. or it's okay, why not. where the next panel is going to talk about political heavy lifting, when i come as a free trader and they say should i take the heat for this, i say no, it's not worth it. and ultimately that's where i come down. it's not a bad agreement. it has some parts that i think are bad and will ultimately make
us unhappy, but basically it's just not worth it. [ applause ] >> thanks. very subdued today. [ laughter ] >> before we open up to questions, i want to address one point and maybe you guys do as well. i disagree with some of the things he said. one point i'd like to call your attention to is chapter 30 of this agreement, the -- final provisions. we gave that an eight. that takes account -- that's about excessions. this agreement is already working to inspire unilateral reforms in asia. you see taiwan, china, the philippines, indonesia, thailand engaging in all types of reforms. that's a success already. that's good for those countries. it's good for us.
and really there's no other game in town. i -- i don't see why you can't pursue an agreement that the terms of which can change as new members exceed. why you would choose nothing as opposed to that. there is liberalization here. you've seen our scores. i don't want to get too into that. does anybody else up here want to -- >> just one sentence response to that. i think very clear that some of the countries are moving towards changes to make to join the tpp because they thought the tpp would be a much activer agreement and more liberalizing than it is. i don't think that's an endorsement given the countries involved. >> we will have to exceed to their standards. >> i will say, i mean, i think one of the differences in the analysis is about expectations, right? and derek is looking for something that's better.
i will admit that i was pleasantly surprised with the tpp. the way the administration was selling it, talking so much about setting rules, so much about exports, it just really buying into the approach to trade negotiations and doing it with gusto. i was thinking that the tpp would be less ambitious than it is. and so seeing it as sort of a standard trade agreement involving 12 countries, taking on a few new issues. that to me is a positive. it's not worse than past agreements. and it's moving things in the right direction. i think maybe the expectations where, you know, how high of a score do you need to have before you think the tpp is good i think is where the difference lies. >> we're going to open it up to questions. i'll call on you and wait for the mike to come please and
identify yourself and your affiliation. >> and don't launch us into a diatribe because i didn't do that, right, so you can't. [ laughter ] >> get him a mike, please. this man here. >> thanks. question on the market access or tier one i think that you grade. i understand that you graded the average of the tpp countries. what grade would you assign specifically to the u.s. and given the very liberalization that are made by the u.s., especially in the short term, would it be more than two or three? and wouldn't that, which is a testimony to the skill of sds as
ustr not be the reason why there is not more liberalization that would satisfy you? >> i'll take a quick stab at that. we are much more interested in seeing u.s. liberalization here at home. the domestic barriers to trade are very costly. the preservation of tariffs on a lot of agricultural products, the duration of those tariffs. it's not even a phase-out on pickup trucks. it's all backloaded to 2047 or 2048. so i think the ustr did what trade negotiators, to negotiate to open foreign markets and keep yours closed. so in that regard, he was successful. i would like to see more
liberalization here. why do we continue to protect the textile industry with these rigid rules of origin? the benefits from the agreement that should accrue to producers and consumers are shifted to those producers. anyway, there's at lot of protectionism remaining, but ultimately we will liberalize. the score wouldn't be that much different. right now 36% of u.s. tariffs are duty free. on entry into force, 90% will be. there's just some political holdouts that are problematic. >> briefly, you were leading me and i'm following you. i'm going to the water and i'm going to drink some. you know, the administration's tariff claims are of course restricted bit the fact thatist tariffs in most cases are not that high. we eliminated thousands and
though thousands of 1% tariffs. i think can think three places. i wasn't in the room. i don't know what's actually possible. my response when my colleagues said they wouldn't agree to that, i said cut them out of the negotiations. there's approaches here that are fundamentally different. the cases i can think of the nonconforming measures and services. a lot of them are in transport and we started it in shipping. so there's one. we could have gotten possibly better terms on soes, depends on which terms are being blocked by which country. if we had given the vietnamese better access in textiles. and i agree about agriculture. it's a positive. i can see why farm states like it because japan is more open than it was. the section most protectionist culture in agriculture after
japan was the u.s. but we're not opening our market as much as others. that's not a sensible position in my view. it may be politically justified. we bought off paul ryan are dairy provisions. it may be a politically good move, but it doesn't show this is -- we were hell bent for agricultural liberalization. >> other questions? one, two, three. so -- the lady -- >> thank you. michelle, wilson center. my question is, final provisions for the future. this is a temporal die mention, many tariffs would be in the future. how would you grade implementation and compliance
provisions? >> you're talking about dispute settlement provisions when you say compliance? >> well, this is across a whole bunch of sectors here. we've got an argument here that the provisions in soes are weak, there are exemptions in services. how effective do you think the u.s. and others will be in the actual implementation and compliance? there's another thing about what is its overall implementation compliance and impact. >> i think that's a great question. if you look at past ftas, there aren't a lot of disputes. there's not a lot of compliance -- pursuit of compliance. there were a couple disputes under nafta. they didn't work so well and we haven't seen any others. so you get the sense that countries are signing these and then you don't know what they're doing with them. maybe it just means they've reduced all their tariffs and
the rules themselves aren't that important so there's nothing to enforce. maybe the tpp is a little bit different. if they're going to mean anything, somebody needs to bring complaints. i don't have a good answer. one thing i will say is that if you look at the dispute provisions, they've tried hard to make sure there's not the nafta problem where panels get blocked. and it's complicated what they've done. i see why it had to be complicated. the wto works because you have a director general that can get the panel established. i think they've done a good job of creating a dispute settlement process that will work if people use it. the question is, are people going to use it. that's going to depend on future administrations. it depends who that person is obviously. one other point is there are a number of provisions that are not subject to dispute settlement.
so i think like with the rest of it, there's good and bad in there. i think it, you have many provisions are enforceable. what we don't know is whether anyone will choose to enforce them. >> just to take service as an example, i don't locate this as an enforcement issue. i think the provisions still wouldn't bring us the gains that we need. they may not be fully enforced, by via prior problem. there's obviously the political danger that we will sell them as major services liberalization and people will act as if we're not enforcing the rules. oh, we haven't enforced them, we need to punish these countries. enforcement isn't the issue. now, that's an opinion. i agree with the point about uncertainty. this is one of the problems with such a huge document and all these countries. i would locate the problem prior to enforcement. i don't think full enforcement of these rules is going to get huge gains for the u.s. certainly people arguing that
they are are setting us up for the idea that the trade treaty wasn't enforced when i don't think that is the issue. >> i would also add i think beyond just enforcement and dispute settlement there's sort of a soft power element to this. trade agreements are pe kcue la in everyone believes they're just pretending. that they don't actually agree to do those things, so we assume they're going to violate -- the u.s. certainly does this, violate the rules as soon as we agree to them. having the text and an agreement creates a -- sort of a framework for future diplomatic pressure. i think we're certainly going to see that in terms of the u.s. telling countries how it expects them to implement these provisions. the biologics provision, is it
five, is it eight. what comes out of that will depend on usdr and how much pressure they put on countries to implement those. wherever there's ambiguity, i think we're going to see years and years of talking about how to implement these provisions and what each country thinks they should be. and it may depend a lot on how much energy is put into that in the future. >> shawn, did you have a question? and then one more after that. right there. and then we have to take a break. >> thanks, dan. very interesting discussion. shawn donnelly from the u.s. council for international business. one short comment and then a question. i'm pleased to see what i perceive to be a cato softening of your criticism on isds from your earlier almost jihad against it. [ laughter ] many of us do think having the option to go to expert arbitration as opposed to the national courted vietnam or malaysia is useful.
my question is a different one. how seriously do you take the threat that we always hear that if tpp doesn't pass, if the u.s. doesn't approve it, asia will go to the rcep or something else and have a much lower standard? is that a realistic alternative and how should we deal with that? thanks. >> personally, i don't think the deals are mutually exclusive at all. i think what's more significant about not getting the tpp done is the fact that business wants to move on and supply chains are going to be established. and they're going to oscify. if there's not a tpp, to me, the cost of failure exceed the benefit of success in the short term. and that failure is manifest in the impen trability of some of these markets if we are left behind, if we're not involved.
i think it's very important that this gets done for that reason. >> i'm not an expert. i read people who seem to know more about it than i do. they all seem pretty skeptical. there's the threat of rcep so we better act. i haven't softened on isds, by the way. >> i agree with that. there may be an rcep. it will not be a realization because india's in it. we'll either get no real change in the status quo, diplomatic thee yat iks or not. >> because india's in it and tpp will have no liberalization because the united states is in it? >> one is a necessary statement. one is merely an impeer call evaluation. >> this gentleman right in the center there and then we have to take a break.
>> thank you. rex, northern research. question for mr. watson. or dr. watson. you brought up some numbers earlier, so be the ambassador froman. i was wondering if you could speak specifically about the tariff levels that are going to come down in the tpp versus the tariff levels which will remain in china assuming the tpp passes. thank you. >> you mean -- so what are the tariffs that china is imposing on u.s. -- on imports from the united states? i mean, obviously not going to be lowering tariffs in the tpp that are not in the tpp. i guess i don't really understand your question. >> apologies. allow me to clarify. so overall levels in trade from asia that will be affected by
the tpp i suppose is a direction i'm going. and so if we import a significant amount from china but when we attempt to export we're met with trade barriers in china. when we import a significant amount from japan, we face the same issues. when we -- how much are we importing in japan -- to japan or exporting to japan rather which will be positively affected by this versus how much are we attempting to export to china which will not be affected by this. so how much in total will this tpp affect our overall trade with asia. thanks. >> you know, that's a very practical question. i don't have those numbers off the top of my head in terms of quantity of trade.
i would say, you know, certainly from liberalization in the tpp, those numbers will change. you know, that one of the things about preferential trade agreements is that while they increase trade, they also divert trade. a lot of that increase in trade will go to -- will go to particular country. so i think we'll be importing more from tpp countries as a share. we'll be exporting more to tpp countries as a share. that will impact our trade relationship with china. what those numbers are at the end of the day, i don't have that. i think the trend is there. it's something that will happen. i don't know what the amount is. >> it will certainly affect supply changes and change the nature and composition of where things are produced. but it's very hard to tell, to answer your question. >> anyway, we have to take a break there. going to take a water break. it's out in the winter garden.
thank you for coming and your attention. we have another panel reconvening at 11:00. so about 12 or 13 minutes before we hope you can come back. so, thanks very much. [ applause ] so as you heard a brief break here in this meeting hosted by the cato institute. there will be a second and final panel focusing on ratification of the transpacific partnership and what are some of the obstacles trade officials face in reaching agreement on the tpp. live coverage of that in about 10 to 15 minutes. we'll go back to the opening minutes of this meeting to hear from u.s. trade representative michael froman.
he gave the keynote address at the top of the meeting. >> thanks very much, dan. and, you know, i feel a little bit like one of these isn't like the other. you know, coming from the administration here. there are a number of things obviously we don't fully agree on. i think here is an area where we might well agree on the importance of moving this forward. so i welcome this opportunity and thank dan for the invitation and the opportunity to meet with you. i am delighted to see one of my pred says soecessors here in th row. one of the great things about this job is how bipartisan it is. i'm thankful for you being here. i want to thank the trade team at cato. dan, simon, bill, dan, for bringing their deep expertise on these issues to the debate.
we welcome this report that's being issued today and look forward to reading it and the independent analysis that cato does on this issue. tpp will be the largest years. on a wide range of important policy goals with the results very well -- the results very well mesh with principles common to conservatives, liberals, and libertarians alike. if you're interested in reducing taxes, promoting market based rather than subsidy based competition, internet freedom, and entrepreneurialism, there's a lot to like in this agreement. tpp will eliminate more than 18,000 taxes or tariffs on our exports. it will increase the standard of living of especially low and middle-income americans who spend a higher proportion of their disposable income on consumer goods, and it will help maintain the competitiveness of u.s. manufacturers who rely on important inputs and components.
an american company selling cosmetics or cars to vietnam will find new opportunities as tariffs of 20% to 70% vanish. the proprietor of an asian grocery store across the river in arlington will save herself and her customers money as u.s. tariffs drop on straw mushrooms and baby corn. tpp will be the first agreement since 1994 to cut a subsidy, prohibiting fishery subsidies to contribute to overfishing. that's a historic achievement, both for the removal of the practice and as a conservation measure. this is the first agreement to take on the digital economy, preserving the integrity of the internet and prohibiting efforts to require the localization of infrastructure and other forms of digital protections. tpp will for the first time take a comprehensive approach to imposing disciplines on state-owned enterprises to make sure when they compete against our private firms, they do so on a fair and level playing field.
tpp will support small businesses through its trade facilitation measures, its efforts to harmonize procedures and make regulatory processes more transparent. these are a few of tpp's highlights. and there have been a number of studies done on the benefits of tpp, from the peterson institute to the international trade commission, to the american farm bureau. they have all found that tpp will support more well-paying export related jobs, add consumer purchasing power and spur economic growth here at home. but the peterson institute and the itc, which conducted the two major modeling studies of the agreement both find that the majority of the benefits of tpp will go to workers through higher wages. now, there's a great deal of anxiety among the american people evidenced in the current election dynamic, not to mention across much of the developed world, and dan referred to that in his introduction. there's concern other countries don't follow the same rules we do, but instead act unfairly.
the benefits growth have been broadly shared, but the system is rigged in favor of the few. it's important that we not ignore these concerns. they're real and legitimate. the question is what to do about them. most economists will tell you that technology has more to do with the nature of the changing work force than globalization, but they both contribute. the problem is we don't get to vote on technology. nobody votes on the next generation of computers or whether robots will be deployed in the work place. no do we really get to vote on globalization. globalization is a fact made possible by the containerization of shipping, the spread of broadband, the opening of countries like china and eastern europe that used to be closed to the global economy. globalization is a force. you can't just wish it away or put the genie back in the bottle. what we do get to vote on are trade agreements so they become a magnet of concern, a scapegoat for a broader set of factors
that contribute to economic anxiety. but it's important not to conflate trade agreements with globalization. globalization has impacted the workplace. trade agreements can be part of the solution. trade agreements allow us to shape globalization to our advantage. they're the vehicle through which we help write the rules of the road for the global trading system and do so in a way that reflects our interests and our values. just yesterday, the international trade commission released a study on the effects of u.s. trade agreements since 1984. when we negotiated our first fta with israel. it found in aggregate, our bilateral and regional agreements have added american jobs and increased wages, giving consumers lower prices and greater variety, with the most gains going to lower and middle income americans. we start from the fact that the u.s. already has one of the most open economies in the world. in large part because of decisions made decades ago and
supported by 12 presidents, 6 democrats, 6 republicans. our average applied tariff is less than 1.5%. 50% of all u.s. imports come in duty free. and we don't use regulations as a disguise barrier to trade. when we look abroad, we see markets that are shielded by higher tariffs and opaque and slanted regulatory systems. with the trans-pacific partnership, we can remove barriers, raise standards in the markets, and as a result, increase our export-related jobs which pay up to 18% more on average than non-export related jobs. right now, we compete with low-wage countries all over the world. tpp will open some of the largest and fastest growing countries in the america, and by raising standards in other countries, tpp will help level the playing field for american businesses, workers, farmers and ranchers. but there's something broader at
issue in whether and when tpp moves forward. that's the rules-based system itself. that system helps japan and europe rebuild after the second world war. it allowed the developing countries such as south korea and brazil become emerging markets. it helped lift hundreds of millions of people out of poverty, and here at home, successive rounds of trade liberalization has estimated to add $13 million per american household. we cannot and should not take that system for granted baas it's under attack as more statist and cancelest alternatives are abroad. from our perspective, it's vitally important we maintain and strengthen the rules-based system where every country has certain rights, where all countries are expected to play by the same rules and if they don't, where there's a fair and equitable resolution of disputes, big countries can't
just push little ones around. that system is key to maintaining a stable and prosperous asia pacific region and it's also key to insuring that the global economy works for all americans. it's critically important that we not just sit on the sidelines but proactively shape the global economy in a way that reflects those interests. if the united states were to turn inward, the results would be economically devastating. history has proven beyond a doubt that protectionism doesn't work. raising tariffs on our trading partners would only lead those countries to respond in kind and block our exports. that's a trade war, and we know no one wins in a trade war. turning to protectionism wouldn't increase employment here. it would reduce it. it wouldn't boost economic growth. it would retard it at best and drive the economy into recession at worst. and we know this from experience. in 1930, congress passed and president hoover signed a tariff act which essentially walled off
the united states from imports. hoover's view was this was essential for an era in which he believed americans could not compete against low-wage countries in europe. the thinking was raising tariffs would lead to a resurgence in manufacturing employment in the united states, bit in fact, the opposite happened. we wound up with fewer jobs. we may have had a sizable trade surplus, but we also had the grade depression. not only the high tariffs worsen the great depression, but they contributed to the global of the great economy which led to nationalism in europe and asia. as president reagan once said, protectionism won't open markets to u.s. products but will close them. he said it would mandate the united states violate many of the most basic rules of international trade, and expose our most productive farms and industries to retaliation by other nations. the economic stakes in isolationism are clear and so
are the strategic steaks. rejecting tpp would undermine leadership not only in the asia pisc, but around the world. they couldn't help the question whether we had the will to make good on our commitments. as singapore's prime minister put it, if you're not prepared to deal when it comes to cars and service and agriculture, can we depende on you when it comes to security and military arrangements? now more than ever, it's important that we move ahead with the approval of tpp. earlier this week, i was reading a piece on the opinion pages of the "wall street journal." and they were talking about the impact of brexit on europe. he said the fate of the entire post-world order hangs in the balance and with it the prospects of democracy worldwide. without vigorous american leadership, the prospects are not bright. between the migrant crisis and internal challenges there's a serious risk europe will be
preoccupied for some time. we cannot afford a self-inflicted wound to american leadership at the same time. the good news is that as i meet with members of congress, they're increasingly appreciating the benefits of the agreement and the cost of delay. and those costs of delay are high. we're already seeing our market share in priority products eroded by other countries who already have free trade agreements in place. the peterson institute has estimated a one-year delay in putting tpp into effect would impose a $94 billion cost on the u.s. economy. that equates to about a $700 tax on every american household. moreover, if we don't get it done soon, the other asia pacific countries aren't just going to sit around and wait for us. they'll move on. as new zealand's prime minister put it, these economies aren't going to stand still, beijing will step in and fill the void. so the choice isn't between the tpp and the status quo. it's between the tpp and what's likely to evolve in the absence of